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IndiaTax & ComplianceUpdated: Sep 13, 2026
Direct Answer
Under Section 36(1)(va), if an employer deducts PF/ESI from an employee but deposits it after the statutory due date (15th of the next month), the entire amount is permanently disallowed as an expense, increasing the employer's taxable income.
The Supreme Court Ruling
The Supreme Court of India (Checkmate Services Pvt Ltd) strictly ruled that any delay in depositing the employee's share of provident fund or state insurance beyond the due date under the respective Acts means the employer loses the tax deduction forever.
Pre-Filing Checks
Before filing the Tax Audit Report (Form 3CB-3CD) and the ITR:
- Extract the EPF/ESI challans.
- Match the date of payment on the bank statement with the statutory due date.
- If a payment was due on May 15 but paid on May 16, the auditor must report it in clause 20(b) of Form 3CD, and it will be added back to business income.